TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 884
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....s.7,14,400/-. Initially, the return was processed u/s 143(1) of the Act. Subsequently, however assessee's case was selected for scrutiny assessment. During the assessment proceedings, the Assessing Officer noticed from the statement of computation of income filed along with return of income that the assessee had disclosed an amount of Rs.44,95,164/- as long term capital gain from which an amount of Rs.41,25,667/- was claimed as exempt u/s 54F of the Act. From the computation of capital gain, the Assessing Officer further noted that the assessee has shown the cost of acquisition of agricultural land at Rs.94,600/- and year of acquisition as shown as financial year 1982-83. From the information available on records, the Assessing Officer noted that during the impugned financial year, the assessee along with some other co-owners had sold an immovable property for a consideration of about Rs.42,70 crores and the share of the assessee in the sale consideration was much more than what has been shown in the return of income. He therefore reopened the assessment of the impugned assessment year by issuing a notice u/s 148 of the Act. During the re-assessment proceedings, the assessee appear....
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....ished the amount to be received by all the coparceners out of sale consideration. Since none of the above persons have offered the capital gain to tax, the Assessing Officer called upon them to submit their returns of income. Except the present assessee all others took a plea before the Assessing Officer that though they are liable to capital gain tax but since their status is HUF and the sale consideration received by them in the capacity of coparceners was utilised by them in acquiring residential houses in their individual names, they are not liable to capital gain tax. 7. The Assessing Officer on going through the details of sale consideration shared between the family members noted that they have distributed the sale consideration among their family members under the guise of HUF status for each individual assessee through the registered sale deed. The Assessing Officer was of the view that even though there is no bar for an individual to throw his individual property into the common hotch-pot of the HUF with the intention of abandoning his separate claim therein as held by the Supreme Court in the case of Lakki Reddy China Venkata Reddy vs. Lakki Reddy Lakshmana, still the p....
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....land was out of HUF land income only no capital gain is leviable. The Assessing Officer also disallowed the claim of exemption u/s 54F of the Act on the ground that the assessee is the owner of more than one house on the date of transfer of the asset and as such is not eligible for exemption. Being aggrieved of the assessment order so passed, the assessee preferred an appeal before the CIT (A). 10. In course of hearing of appeal, the assessee reiterating its stand taken before the Assessing Officer submitted that as per the family arrangement made through the partition deed dated 11-11-2005 property was distributed amongst the his members of his family and the property in survey Nos.588/1 and 591 out of which 33 guntas belonged to the assessee was distributed as per the family arrangement between different members of the family and they have also filed their return of income declaring capital gain on receipt of the sale consideration. The CIT (A) however did not accept the claim of the assessee with regard to family settlement and held as under: "5.9 In this context, it may be relevant to observe that the case law....
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....cept the assessee's contention with regard to the family arrangement effected through partition deed dated 11-11-2005 is due to the fact that the said document has not been registered with the registering authority for stamp duty purpose. It is the contention of the learned AR before us that the non-registration of the family arrangement deed would not in any way dilute its effect as it is an arrangement between the family members for resolving the dispute with regard to the property which is existing or which may arise in future. It was submitted by the learned AR that the family arrangement has also been acted upon by the family members as they have become owners of the property falling into the irrespective shares as per the family arrangement. In this context, the learned AR referred to the registered sale deed dated 15-7-2008 wherein all the family members are parties and have sold the property falling into their respective shares as per the family arrangement independently. The learned AR submitted that since the family arrangement took place in the year 2005 and property was also distributed amongst the family members as per the family arrangement deed dated 11-11-2005, only....
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....in the broadest view of the matter is most for the interest of families, and has regard to considerations which in dealing with transactions between persons not members of the same family, would not be taken into account. Matters which would be fatal to the validity of similar transactions between strangers are not objections- to the binding effect-of family arrangements". In other words to put the binding effect and the essentials of a family settlement in a concretised form, the matter may be reduced into the form of the following propositions: (1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family; (2) The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence: (3) The family arrangement may be even oral in which case no registration is necessary; (4) It is well-settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distin....
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.... in this light, rather than as conferring - a new distinct title on each other, that the parties themselves seem to have regarded the arrangement, and we think that it is the duty of the Courts to uphold and give full effect to such an arrangement." 15. The Hon'ble Court finally held as under:- "In view of our finding that the family settlement did not contravene any provision of the law but was a legally valid and binding settlement in accordance with the law, the view of Respondent No. 1 that it was against the provisions of the law was clearly wrong on a point of law and could not be sustained. Similarly the view of the High Court that the compromise required registration was also wrong in view of the clear fact that the mutation petition filed before the Assistant Commissioner did not embody the terms of the family arrangement but was merely in the nature of a memorandum meant for the information of the Court. The High Court further in law in not giving effect to the doctrine of estoppel which is always applied whenever any party to the valid family settlement tries to assail. The High Court furthe....
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....a division by metes and bounds in 1939. Its terms relating to shares would come into effect only in the future if and when division took place. If so understood, the document did not create any interest in immovable properties in praesenti in favour of the parties mentioned therein. If so, it follows that the document was not hit by Section 17 of the Indian Registration Act. 22. The principle underlying Section 17 of the Registration Act is well settled. The decisions cited at the Bar are only application of the said principle to the facts of each case. The decision of the Judicial Committee in (1911) 38 Ind App 104(PC), relates to an instrument of 1884 which wasintended to effect partition immediately and, therefore, it was held that it was void as regards immovable property. The decision in Rajangam Ayyar v. Rajangam Ayyar 50 Ind App 134 : AIR 1922 PC 266, turned upon the terms of Ex. AY whereunder two brothers severed themselves in status and agreed to have a document executed for effectuating the partition. Dealing with the document, the Judicial Committee held that the document did not by itself create, assign, limit or extinguish any right or interest in i....
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....86 intestate and on her death undivided share each in the said property devolves on the parties by virtue of Section 15(a) thereof and they became owners of the said property in terms of the aforesaid previousness of half undivided share in the property. What the family settlement intended to do was to ascertain the portion of their share with definite identification, and the mode of acquiring possession by the petitioner and, therefore, the said document cannot be treated to be a document of title requiring registration. Even if it is assumed for the purpose of argument that the said document created right and title to the property, the clause relating to arbitration agreement could be looked into by the Court without there being any registration of the said document. In Damodar Valley Corporation v. K.K. Kar, of the said judgment the Supreme Court referred to the decision of Union of India v. Kishorilal Gupta, and mentioned with approval the decision recorded by Hon'ble Mr. Justice Subba Rao (as his Lordship then was) that an arbitration clause is a collateral term of a contract as distinguished from its obstantive terms. It was also stated that nonetheles....
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....y Mr. N.K. Chaturvedi. The law is well settled that family arrangement entered into with a view to resolve family disputes, which is bonafide, voluntary and not induced by fraud, coercion or undue influence does not require registration. Such family arrangements by itself would convey right, title and interest in immovable property without any further requirements. Thus when the property was sold on 31-3-2006, the assessee had nor right whatsoever in the property but was entitled to receive only the contribution made by him at the time of purchase of the property. In the sale deed dated 31/3/2006 by which the property was sold the fact that the assessee was paid Rs.5.00 lacs (which is in accordance with the family arrangement) is duly recorded. Though the sale deed does not refer to the family arrangement it is clear from the circumstances that the assessee received only Rs.5.00 lacs which is duly recorded in the sale deed, that the family arrangement had been acted upon. It is also seen that Mr. N.K. Chaturvedi had offered the entire capital gain on sale of the property to tax and has been taxed on such capital gain. In these circumstances we are of the view that the order of the ....
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....consideration at the hands of the assessee for computing capital gain. The grounds raised are therefore dismissed. 20. In ground No.4, the assessee has raised the issue of rejection of claim of indexation from 1981. 21. Briefly the facts are, in course of the assessment proceeding the assessee pleaded that since the land in question was under the protected tenancy of the assessee's family prior to 1981, the fair market value of the property as on 1-4-1981, the fair market value of the property as on 1-4-1981 of Rs.94,600/- should be taken as the cost of acquisition for the purpose of indexation. The Assessing Officer however did not accept the claim of the assessee by noting that as per the certificate issued by the Revenue Divisional Officer dt. 24-2-1993. The assessee along with 12 others had purchased land admeasuring Ac.14.05 guntas for a consideration of Rs.27,200. The CIT (A) also confirmed the view of the Assessing Officer on this issue. 22. Having heard the contentions of the parties in the context of the materials on record we do not find any infirmity in the order of the revenue authorities. Though the assessee has contended that the land in question was received by as....